One-sided debate

As any frustrated central banker will tell you, a disciplined approach to monetary policy isn’t worth much if the politicians and bureaucrats who control spending and taxation can’t rein in their appetites.

As any frustrated central banker will tell you, a disciplined approach to monetary policy isn’t worth much if the politicians and bureaucrats who control spending and taxation can’t rein in their appetites.

By David Schutt
July 2001
Institutional Investor Magazine

In turn, political leaders often complain that their bold visions are compromised by the tight money policies of their central banks. These time-honored debates occur in virtually every part of the globe - with at least one notable exception. The European Union doesn’t have any recognizable fiscal counterpart to its central bank. Should it?

Yes, says an emphatic Didier Reynders, now serving as president of the euro group, an informal assembly of EU ministers whose countries have adopted that currency. And the ambitious and occasionally abrasive Belgian finance chief wants his group, which meets monthly to discuss regional economic issues, to be the force behind this economic government (“Reynders’s Moment,” page 25). He has begun asking individual governments to allow the euro group to vet their spending and taxation plans before they are presented to local legislators. There’s a problem, however. Although his program has general support, Reynders’s out-spoken style has already gotten him into hot water with European Central Bank head Wim Duisenberg, as well as other economic and political leaders. As a result, Reynders, who will occupy his current post for six more months, may not be able to muster the political clout to see his plan through. Nonetheless, with the euro so weak, the issue of fiscal cooperation will no doubt survive his presidency.

Our profile of Reynders and the state of economic government marks the first contribution from II’s new European Editor, Tom Buerkle, who will oversee our editorial staff there while covering policy and macroeconomic issues, among other subjects. Buerkle joins us from the International Herald Tribune, where he most recently served as its London-based international economics correspondent. Having spent nearly four years during the mid-'90s based in Brussels, Buerkle is in a unique position to put the goals - and challenges - of leaders like Reynders into perspective.

Like most of his fellow citizens, Reynders knows that his small country’s “destiny is tied to Europe’s,” says Buerkle. The Belgians, he adds, “aren’t trying to remake Europe in their own image, nor do they have global pretensions.” That allows leaders like Reynders to push European cooperation. Whether other European governments are ready or willing to go along right now is another matter.

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